Practical Advice

Evolving State Law Patchwork Imposes New Obligations on Subscription Businesses

Published: Jul. 08, 2024

Updated: Jul. 16, 2024

Automatically renewing subscriptions continue to be a prime target for state legislatures. The first six months of 2024 have seen a steady flow of new auto-renewal laws, as well as class action complaints and regulatory enforcements aimed at subscription businesses, including the DOJ’s complaint against Adobe (on behalf of the FTC), which is particularly important to consider for businesses that sell annual plans that are billed monthly. Companies should stay abreast of legislative and enforcement developments and regularly evaluate their practices to ensure compliance with this rapidly evolving legal landscape. 

The latest developments include additions to an expanding patchwork of notice requirements, a first-of-its-kind restriction on presenting “save” offers during cancellation, and legislatures considering mandating separate consent specifically for automatic renewal during enrollment. 

Some of the most notable auto-renewal developments from the first half of 2024 include: 

Additional notice obligations, often packaged in ambiguous statutory language that makes it difficult to discern precisely when and under what circumstances a notice is required. Some of these unclear laws have already gone into effect.

  • Tennessee enacted S.B. 1894 (took effect July 1, 2024), which supplements the state’s existing auto-renewal law. The revised law adds an ambiguous notice requirement: When “the automatic renewal” will occur more than 60 days after the consumer provides affirmative consent, a business (or the entity with the direct billing relationship with the consumer) must provide a consumer with a clear and conspicuous notice of when the consumer will be charged. 
      • Though this could be read to require a notice before any renewal that occurs more than 60 days after initial signup, it may also be fair to read it more narrowly (e.g., where the initial term or free trial is longer than 60 days). 
      • It is also unclear what type of notice is required and when the notice must be provided. 
  • Virginia enacted H.B. 744 (took effect July 1, 2024), which supplements the state’s existing auto-renewal law. Sellers must provide a renewal notice if the renewal will occur after a period of more than 30 days if the renewal will cause the contract to be in effect for more than 12 months. Because some months are 31 days (and thus longer than 30 days), this may effectively require businesses to send annual renewal notices to all monthly subscribers, similar to an existing Colorado requirement. Notably, this law will apply not only in the B2C context, but also to contracts with small businesses. 
  • Minnesota enacted S.B. 4097, an omnibus bill containing the state’s first auto-renewal law (takes effect January 1, 2025). The new law will require annual renewal notices—regardless of subscription term length—for “continuous services,” a term that is worded broadly enough to potentially capture all or most subscriptions. It will also require notices in advance of the end of free trials lasting more than 30 days.
  • Utah also enacted its first auto-renewal law, H.B. 174 (takes effect January 1, 2025). The new law will require notices in advance of the end of any free trial, regardless of length. It will also require renewal notices in advance of any renewal term that exceeds 45 days. 
  • South Carolina also joined the fray, enacting S.B. 434, its first auto-renewal law (took effect immediately upon passage on May 20, 2024). This new law requires renewal notices for any renewal that extends the subscription beyond 6 months from initiation of the contract when the subscription renewal term is more than one month. However, the scope of the law is limited to “service contracts”—i.e., contracts for (a) work, labor, or personal services, (b) privileges for transportation, hotels and restaurants, education, entertainment, recreation, physical culture, hospital accommodations, funerals, cemetery accommodations, “and the like,” and (c) insurance. Many online businesses likely fall outside the law’s scope. 

Two of these new laws have notable additional requirements:

  • Minnesota’s new law will uniquely impact cancellation practices, prohibiting businesses from engaging in unfair or abusive tactics or providing “save” offers without the subscriber’s permission. This is similar to one of the FTC’s proposed amendments to the Negative Option Rule, which are still a work in progress, though the Minnesota law includes exceptions that provide businesses with some leeway. 
  • Tennessee’s revised law adds a definition of “affirmative consent” that, based on a strained reading, could be read to require a business to obtain the consumer’s consent to the automatic renewal terms separately from their consent to the rest of the contract. Fortunately, amendments made during the legislative cycle removed the piece of the original bill that would have expressly required further affirmative consent.

Several states’ legislative sessions have not yet concluded, including California’s where an extremely impactful auto-renewal bill continues to advance, which, among other things, would require separate, affirmative consent. Moreover, the FTC is working to finalize amendments to the Negative Option Rule. Thus, there is no sign that these auto-renewal developments will be stopping.